Okay, you knew that. Dominion had the deck so stacked in its favor for Wednesday's Virginia offshore wind lease auction that the question everyone was asking at the end wasn't "who won?" but "who bid against Dominion, and why did they bother?"
The answer to the first question proved to be Charlottesville-based Apex Energy, a far more experienced player in the wind industry-but one without Dominion's lock on the Virginia power market.
There was much to criticize about the auction format and the process that led inevitably to Dominion's win, but this historic step is still hugely exciting for offshore wind advocates. If Dominion follows through on the commitment it just made to develop offshore wind, Virginia will be a winner, too.
That "if" has a lot of people worried, given that Dominion is both a participant in the offshore wind industry and one of its loudest detractors. Company executives talk about their desire to develop the lease area, and also their opinion that offshore wind energy is way too expensive to succeed. Often they make both points in the same conversation.
Observers can't help wondering why a company would pour money into a venture if it doesn't believe it can sell its own product. Two possible reasons come to mind: one, because it is willing to gamble on political and market changes that will make its venture successful after all; or two, because by spending the money to win the lease, the company prevents any competitor from occupying the space. One is gutsy, the other is evil. It is possible for both to be true.
The decision in the case (PUE-2012-00128) reflects the same discouraging themes we have seen from our regulators before: a tendency to believe everything Dominion tells them, coupled with an absolute refusal to acknowledge the climate crisis bearing down upon us and the changes in the energy market that make fossil fuels increasingly risky.
As the SCC put it in its order, "The relevant statutes... do not require the Commission to find any particular level of environmental benefit, or an absence of environmental harm, as a precondition to approval." (Note to legislators: How about fixing that?)
The SCC's state of denial is not just about the future. Since at least the 1980s, Dominion has consistently overestimated future demand growth.
A little skepticism might be in order when Dominion projects the same level of demand growth that keeps not materializing. But the SCC is not skeptical. Its order declares Dominion's load forecasts "reasonable."
Evidently one can be both reasonable and wrong. Demonstrating this in real time, only a few days after the SCC issued its order this month, Dominion CEO Tom Farrell had to explain to shareholders why electricity demand has not grown this year in line with company predictions.
Amnesia was also in evidence at the public hearing on the case, where proponents of the gas plant - everyone from Dominion employees to the SCC staff - kept insisting on the environmental advantages of natural gas.
The operator of Japan's tsunami-hit nuclear power plant sounded the alarm on the gravity of the deepening crisis of containment at the coastal site on Friday, saying that there are more than 200,000 tons of radioactive water in makeshift tanks vulnerable to leaks, with no reliable way to check on them or anywhere to transfer the water. -The New York Times, August 23, 2013
A friend asked me recently whether I thought the ongoing disaster at the Fukishima nuclear plant in Japan would have repercussions here in Virginia, where Dominion Power operates four nuclear reactors at two plants and wants to build another. I feel pretty sure the answer is no. Economics will kill Dominion's nuclear dream, but not risk. We just don't think that way.
We think like this: Fukishima was taken out by a tsunami. There are no tsunamis in central Virginia. Ergo, there is no risk to Virginia's nuclear plants from a tsunami, so Japan's sudden revulsion against nuclear power shouldn't put us off our feed half a world away.
So why did countries like Germany, which also has no tsunamis, freak out and swear off nuclear for good?
They drew an entirely different lesson: Japan is a smart, technologically-advanced nation. Japan did not anticipate the disaster that destroyed Fukishima. Ergo, unanticipated disasters happen even in smart, technologically-advanced nations.
Or put another way: Murphy's Law also applies to nuclear plants. We ignore Murphy at our peril.
But ignore him we do. We had our own brush with nuclear disaster two years ago, when a rare, magnitude 5.8 earthquake shook central Virginia and led to a months-long shutdown of the two North Anna nuclear reactors. No one expected an earthquake of this strength there, least of all the plants' designers. Fortunately, the reactors survived intact, but I don't know of anyone who wants to repeat the experiment. Presumably Dominion intends the "next" North Anna reactor to be designed to withstand stronger earthquakes. Do you feel better about nuclear now, or worse?
Murphy's Law operates with ferocity across the energy sector. An industry expert told me the BP oil spill in the Gulf happened in spite of four different safeguards in place on the drilling rig, each of which should have stopped the blowout from happening. And that spill was not an isolated incident; only the year before, a similar blowout off the coast of Australia created a 2,300 square mile oil slick-about the size of Delaware. U.S. papers largely ignored it. Spills are so common in oil drilling that they rarely warrant a headline. Yet somehow those who support offshore oil drilling off the coast of Virginia feel sure it won't happen here.
Or take mountaintop removal coal mining (please). Right now powerful explosives are blasting away the tops of mountains in southwest Virginia and across Appalachia. The rubble is being dumped into stream valleys, while huge machines scrape off the thin seams of coal. Federal law provides that no streams should be harmed, and the mountains should afterwards be restored-requirements so fanciful that neither mining companies nor state officials take them seriously. So it's not surprising that streams and rivers are polluted, species disappear, building foundations crack, and residents die young. That's not the plan going wrong, it's the plan.
In the past most Americans participated in an unspoken agreement to ignore the risks involved in producing energy, because we had no intention of stopping what we were doing. If it's a choice between risky energy and no energy, we will go with risky every time. Denying the risks is a coping mechanism that lets us sleep at night. Not incidentally, this is also the strategy used by fossil fuel interests to keep the public from demanding action on climate change.
But the widespread availability of cleaner alternatives gives us energy options we didn't feel we had before. Increases in energy efficiency and tumbling prices for wind and solar mean we can afford to look more honestly at the damage we do and the risks we run by powering our 21st century economy with 20th century fuels.
I like to think the Virginia legislature's decision to maintain the ban on uranium mining-for now-shows that our ability to ignore risks has its limits. Mining anything hazardous is inherently risky in a climate like Virginia's, where rainfall continually recharges the water table. Put nasty stuff between the rain and the water table, and you will find contamination downstream. The idea that water can be kept out of millions of tons of radioactive mine tailings for thousands of years strains credulity. The idea that this might be accomplished by a mining company whose sole purpose is to make money strains credulity altogether.
The fact that a good many of Virginia's politicians lined up on the side of the mining company anyway is not necessarily evidence of their capacity for ignoring risk. More likely, it simply demonstrates how extreme is the corrupting power of money in Virginia politics. Unfortunately, that shows no signs of changing.
The new law creates a two-year pilot program allowing customers of Dominion Virginia Power to install projects as large as 1 megawatt (1,000 kilowatts) using PPAs financed by private companies. Projects must have a minimum size of 50 kilowatts, so the program can be used by many commercial customers but excludes homeowners, whose solar PV systems more typically fall in the 4-to-8 kilowatt size.
Importantly, however, the 50-kilowatt minimum does not apply to tax-exempt entities. PPAs are one of the only ways available for tax-exempt entities to benefit from the federal 30% tax credit for renewable energy systems; a tax-paying investor actually owns the system and uses the credits, passing along the savings to the customer. Thus the program could open up a new solar market in Virginia focused on what might be considered a natural vanguard for renewable energy: houses of worship, colleges, schools and nonprofits.
PPAs also offer an advantage over buying solar panels outright: even though the solar system is on the customer's roof, someone else actually installs, owns and maintains it. That means less hassle for the customer and no upfront capital cost. The customer only has to pay for the solar power that's produced. With prices for solar systems having fallen dramatically in recent years, customers will generally be able to buy solar energy under a PPA for no more than they now pay for power from non-renewable sources.
But the latest proposal for a plant in Brunswick has come in for fierce criticism, and for good reason: we don't need another gas plant. Dominion has exaggerated the growth in demand that it says justifies the plant, and the company could more cheaply meet its actual needs with energy efficiency and renewable energy.
Moreover, the world is changing, and the energy model of big utilities running big baseload power plants is becoming outdated. If Dominion builds another of these, Virginia could end up stuck with a giant concrete paperweight. The SCC owes it to customers not to let this happen.
Every year Dominion tells regulators it expects demand to increase by 1.5% to 2% per year indefinitely, but its actual energy sales have been essentially flat since 2006. Sure, the recent recession threw everyone a curveball, but Dominion's tendency to overstate future demand goes back decades. The company seems not to have anticipated widespread changes like more efficient appliances and better building codes that let consumers use less electricity even while we're buying more gadgets.
With a little effort, we could save even more energy. Virginia ranks in the bottom half of states for energy efficiency, and Dominion is not on track to meet even the modest efficiency goals of the Virginia Energy Plan.
Frankly, it's hard to understand right-wing enthusiasm in the U.S. for a pipeline benefiting a Canadian company extracting Canadian oil intended for the world market. In spite of all the talk about jobs, it will employ only a few thousand workers temporarily, and not in the areas of the country where unemployed construction workers live. Moreover, building it requires the government to seize private property from unwilling landowners to benefit a private interest-usually the sort of thing that makes Republicans go ballistic.
I might add that the environmental damage being done to thousands of square miles of Canadian arboreal forests and lakes is staggering-but Republicans have long since made it clear that they do not consider despoiling nature a drawback when there is energy to be had and profit to be made. (If you are a Republican and you bristle at this, see if you can name a recent oil, gas, or coal mining project your party has opposed for environmental reasons. I can only name one, and that doesn't get beyond "sort of." See the Tennessee Conservative Union's ad opposing mountaintop removal coal mining, now that a Chinese company wants to do it. )
Some would argue that the climate case against Keystone is overstated. Tar sands oil is "only" 14-24% more carbon intensive than conventional oil, if you ignore a nasty byproduct called petroleum coke that adds to the total carbon footprint. Yet surely if the reverse were true, and the carbon footprint of tar sands oil were less than that of conventional oil, it would be hailed as some kind of a planet-saving fuel. Incremental changes are what got us into this mess in the first place.
If Keystone represents evil, though, it has plenty of company, and there is blame enough to go around. Canadians are developing tar sands oil because the worldwide demand for petroleum is high and growing, there is money to be made meeting the demand, and there is no one who will make them stop. The harm done exceeds the profit to be made, but most of the harm is borne by people in other countries.
Mother Earth to Tom Farrell: The correct answer is "renewable energy."
Most of the rest of the country gets this. Wind supplied more new electric generation than natural gas did in 2012. More people work in solar energy than in coal mining. Renewable energy has overtaken nuclear worldwide. Almost no one is building nuclear plants, partly because-here's an inconvenient truth for you, Tom-they cost too much. Almost three years ago a Duke University study found that power from new nuclear plants is more expensive than solar energy, and the cost of solar has only gone down since then.
But Farrell is convinced wind and solar can't provide reliable electricity to power the whole grid. You'd think he'd been reading propaganda from the Koch Brothers and had come to believe that if there are solar panels somewhere and a cloud crosses the sun, the whole grid crashes.
Can I just point out here that Dominion's own North Anna nuclear reactors shut down suddenly in 2011 following an earthquake in Virginia, and the grid did not crash? Even though nuclear is one-third of Dominion's Virginia portfolio, and North Anna represents more than half of that? And even though, while weather forecasters are pretty good at predicting regional cloud cover, no one can yet predict an earthquake?
The reason the grid didn't crash is that grid operators make sure there is enough surplus generation available to keep supplying power even at times of catastrophic failure. And note that the nuclear plants didn't come back online when the clouds cleared off, either. They were down for four months.
If nuclear power is more expensive than renewables, and it has to be backed up 100% with other forms of energy, for much longer time periods, where is the place for new nuclear?
Yes, Virginians want solar power. Investing in solar means stably priced electricity, cleaner air and lower greenhouse gas emissions. Solar power is now cost-effective in Virginia even in the absence of state incentives, thanks to federal tax credits and a steep decline in the price of solar panels. But a high upfront cost still limits who can afford to install it.
Utilities and the SCC have a role to play in bringing new solar power onto the grid. Dominion's program to install 30 megawatts of solar on leased rooftops, which the SCC approved this fall, provides an example of how utilities can strengthen the grid, diversify their power sources, supply valuable peak-demand electricity, and contribute to their own learning curve on integrating renewable energy, all while meeting a portion of their customers' demand for clean power.
The 3-megawatt program, on the other hand, gets nothing right. Under the program, customers who have solar panels would sell all their solar power to Dominion for 15 cents per kilowatt-hour (kWh), and buy regular fossil-fuel electricity (known as "brown power") from Dominion at the normal retail rate of about 11 cents. Cost to Dominion: 4 cents/kWh.
Dominion would then resell the solar power to the participants in its Green Power Program, not for the 4 cents it costs the company, but for 11 cents. Dominion would keep 7 cents/kWh.
Dominion tells us that the 7 cents would go to its rate base, not its own bottom line. But it's clear who loses. The do-gooders who pay extra on their utility bills for the Green Power Program would pay 11 cents for something Dominion bought for 4 cents. They are being played for chumps.
So how did we do? Well, this is Virginia. Progress is slow, the utilities are powerful, and half the legislature doesn't believe in climate change. On the other hand, they do believe in business. Under the circumstances, we did okay.
Renewable Portfolio Standards: bye-bye, bonuses
Readers of this blog already know the long, miserable tale of Virginia's weak and ineffective, voluntary renewable portfolio standard (RPS), which has enriched utilities with tens of millions of dollars in incentives without bringing any new renewable energy projects to Virginia. This year the legislature went halfway to fixing the problem. Legislation negotiated between the office of the Attorney General and the utilities will deprive utilities of future ill-gotten gains for meeting the RPS law, but won't change the pathetic nature of the law itself.
Stripping out the RPS incentives was only part of a bigger, more complex bill that sweetens the deal for utilities in other ways, so it's hard to judge whether the legislation as a whole marks a victory for consumers. Skeptics will note that Dominion's stock price has actually gone up several percentage points since the deal was announced, which you wouldn't expect if the AG were correct that the bill will save consumers close to a billion dollars over time.
What is clear is that the RPS remains as voluntary and as crummy as it ever was, but the utilities can no longer use it to rip off ratepayers while pretending to be good citizens. Some environmental groups consider stripping out the incentives a bad thing, on the theory that only by giving utilities a bonus can we expect them to meet the goals. Other groups (including the Sierra Club) believe Dominion, at least, will want to maintain its greenwashed public image by continuing to meet the RPS goals, and that ending the consumer rip-off is worth celebrating.
The new technique of natural gas extraction known as hydraulic fracturing with horizontal drilling, or "fracking," has unlocked vast supplies of methane trapped in shale formations across the country, driving down the price of natural gas to historic lows and promising a supply that the government estimates will last 92 years at current consumption levels. Electric utilities have been switching from dirty coal to "clean natural gas" at record rates.
But instead of ushering in a future of boundless clean energy, natural gas has been setting off alarm bells all over the country. First, there are those family farmers and other landowners who leased their land for fracking and now say it has contaminated wells and surface water, polluted the air, killed farm animals, ruined crops, and made their lives a living hell with all-day, all-night truck traffic.
The heck with them. They signed contracts. Caveat greedy landowner, right?
Let's offer a little more sympathy to their neighbors who suffer the consequences without getting lease payments. But keep in mind that the gas industry denies all charges. None of this happened. Or if it did, the ruined water wells were due to naturally-occurring methane or other chemicals in the area, and it is an unlucky coincidence that the pollutants reached hazardous levels in the drinking water aquifer shortly after a gas company drilled down through it en route to the natural gas thousands of feet below, with impenetrable rock layers in between.
I once heard a gas industry lobbyist inform a room full of conference attendees that it was impossible for a fracking operation to contaminate drinking water. I was reminded of the way the computer geeks in college used to insist there was no such thing as a computer error. "I'm sure you're right," the rest of us would answer humbly. "Now can you help us recover the data?"
At least the computer geeks would then get busy fixing the bugs so that the next time the system crashed, it was from an entirely different cause. Gas company lobbyists have been stuck at denial, and it has only done them damage with the public. Admitting to a bad well casing seems far preferable to driving a now-widespread belief that methane is migrating up through rock fissures caused by fracking.
As for the other complaints-the 24-7 truck traffic, extra air pollution from operations, polluted wastewater, and occasional surface spills-the response from the gas industry and its friends has been that this is the price of progress. Industry is not pretty. Get over it. Who entitled you to a quiet life in the countryside?
But another alarm bell has been ringing, and it gets progressively louder. This one warns that drilling for natural gas, far from being the answer to climate change, may actually be making it worse. The problem is one of "fugitive" emissions, which sounds vaguely criminal and exciting, but simply refers to the small percentage of natural gas that escapes into the atmosphere at drilling sites. Methane, the major ingredient of natural gas, is a greenhouse gas that is much shorter-acting than carbon dioxide but twenty-five times more powerful. If recent analyses prove correct, the amount of methane that escapes during the fracking process may be enough to make natural gas worse than coal as a driver of climate change. This is especially unhappy news given that natural gas integrates well with more variable energy sources like wind and solar, and environmentalists had been counting on it to help in the transition to a future powered mainly by renewable energy.
The trillion-dollar question is whether all these problems are inherent in natural gas drilling, or whether the gas companies could solve them if they put their minds to it. After all, wind energy companies have shown they can be responsive to environmental concerns and still grow as an industry. Environmentalists have turned from being the biggest critics of wind energy to its biggest advocates. There's no rule saying gas drillers have to stonewall, or that the companies with the best operations have to support those drillers whose operations threaten communities and the climate.
Drilling companies don't want methane to escape, obviously, because that is lost revenue for them. But neither do they seem to be making heroic efforts to monitor and prevent fugitive emissions. A few companies have been using innovative approaches to solve other problems, however. One has developed a method that uses propane as the fracking fluid, saving millions of gallons of fresh water for every well. The propane returns to the surface with the gas to be reused in a virtuous cycle.
Unfortunately, this method turns out to be more expensive than using water, which is often free if you grab it before anyone else realizes they might need it. So while you have to admire the elegance of the propane solution, you can't really expect any self-respecting capitalist to adopt it just because it is better for society in general.
The same is true of an experimental approach that uses CO2 as the fracking medium. When water is the medium, most of what is injected remains underground permanently. CO2 seems to behave the same way, suggesting that the fracking wells might be able to sequester enough carbon underground to offset much of the CO2 that is emitted when the gas is burned. Coupled with carbon capture technology at plants burning natural gas for electricity, this technique would significantly lower the carbon footprint of natural gas. Whether it is enough to offset the problem of fugitive methane emissions is unclear.
But CO2 is already used in oil extraction, and drilling companies can't get enough of it as it is, because carbon capture is expensive. Sure, it's not as expensive as adapting our coastal cities to rising sea levels caused by climate change, but that's a cost to society; carbon capture is a cost to industry. Any gas company or utility that adopts more expensive methods than its competitors, just because it's better for society, won't be around for long.
Capitalism can't solve this problem alone, or any of the other pollution issues posed by natural gas extraction. Nor are individual states able to regulate practices effectively, because companies that face higher costs in a well-regulated state will move to states with more lax regulations in order to retain their competitive position.
The only effective answer is for the federal government to impose a set of best practices that apply to all members of the industry nationwide, so the good actors aren't placed at a competitive disadvantage. The requirements would include extraction practices that minimize the risk of groundwater and surface water contamination, reduce air pollution, and prevent the escape of methane into the air. They would provide for monitoring and analysis, so regulators and industry would know where, when and how to take corrective measures. They would also cover the consumption end of the cycle, requiring carbon capture technology for all new fossil-fueled electric generation, and ensuring that the costs to society are borne by the industry.
This isn't a radical idea, by the way. It is how we used to approach industry-wide problems, back before fossil fuel lobbyists reframed regulation as a dirty word that meant we were no longer a free people. The natural gas industry is now in a hugely dominant position over other fossil fuels. They can afford to implement rigorous best practices across the board and still retain a competitive edge. They should be lobbying to make them universal, not fighting efforts to regulate.
The alarms bells are growing louder. Will the gas industry rise to meet the emergency, or just keep trying to cut the wires?